Elon Musk doesn’t want investors and financiers to bet on Tesla’s stock market crash.
Last May, the richest man in the world attacked Bill Gates, who was previously the richest man in the world, because Microsoft (MSFT) The co-founder had a $500 million short position against Tesla (TSLA) . Selling stocks short is a bet that the price will fall.
“Sorry, but I can’t take your climate change philanthropy seriously when you have a huge short position against Tesla, the company doing the most to solve climate change,” Musk recently wrote to Gates. It was the end of a conversation the two billionaires had about working together for common purposes.
The tycoon later followed up his criticism with an unflattering and harsh tweet aimed at Gates.
A $3.3 billion bet
Currently, Tesla is recognized by investors as the maker of Model 3 and Model S sedans is the sixth largest company in the world by market value. Its capitalization at last check was $901 billion. This gives Musk the final say.
But that position hasn’t stopped financiers from betting against him and Tesla. The latest: Scott Burg, chief investment officer at Deer Park Road Management, Steamboat Springs, Colo.
According to a recent filing with the Securities and Exchange Commission, Burg acquired put options on 4,786,400 Tesla shares on June 30. The value of these derivatives was $3.3 billion as of June 30.
A put option gives the holder the right but not the obligation to sell shares of an underlying security on or before a certain price. When an investor acquires a put option, it is bearish on the future performance of the underlying stock.
Tesla shares closed the second quarter at $673.42. at last check, they are trading around $863. Tesla shares have gained 28% since the end of the second quarter. That means Burg’s bet hasn’t paid off, at least not yet.
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The financier recently deleted his Twitter account after being contacted by Bloomberg News about this latest bet. The bet is not surprising, however, as Burg has been predicting the downfall of Tesla and Musk for many years.
“Now Tesla will squish like a bug,” the financier was foreseen on December 22, 2020.
Before deleting his account, Burg regularly posted messages on Twitter using the hashtag #TSLAQ. This symbol is used on social media by the most extreme critics of Musk and Tesla. They are convinced that the electric vehicle manufacturer will go bankrupt. (“Q” until 2016 was placed at the end of a Nasdaq stock symbol to indicate that the company had filed under bankruptcy laws, according to Investopedia.)
“You know what a death spiral is? It’s coming,” Burg tweeted on May 20, according to records kept by Tesla fans on the platform. That day Tesla shares were down more than 6%.
Tesla has been a disaster for short-sellers
Deer Park Road Management specializes in distressed credit opportunities. In early August, Deer Park founder and CEO Michael Craig-Scheckman and Burg, who is managing director and chief investment officer, held a conference call to discuss the changing credit cycle and distressed credit opportunities, according to a post from the company’s official Twitter account.
Burg’s bet is surprising because Tesla dominates the EV market and almost all automakers want to develop electric models. The company is also leading the way in autonomous vehicles and has an extremely busy roadmap for the next couple of years, notably with the launch of the much-anticipated Cybertruck, a futuristic pickup/truck.
The financier is not the first to place a huge bet against Tesla. Hedge fund heavyweight David Einhorn of Greenlight Capital has paid a heavy price. Musk was literally short handed to Einhorn in 2018 when Tesla was on the brink of the financial abyss.
“Want to thank @elonmusk for the shorts,” Einhorn tweeted in August 2018 with a photo of the shorts. “He’s a man of his word! They came with some manufacturing defects. #tesla.”
“Put them on and post a selfie,” Musk commented.